Professor Mike Rozeff: Google Will Stumble

Professor Mike Rozeff warns investors about Google:

In the news today is a Google acquisition of a company called Nest for $3.2 billion and an acquisition by Nest of a company called Dropcam for $0.555 billion. These companies make products that have nothing to do with Google’s main line of business. These are called “unrelated” acquisitions. Google has been acquiring one company a week since 2010. Since 2001, one partial list contains 158 companies. Based on the history of other companies that have followed similar acquisition practices, I predict that Google will have a major setback, such as an accounting scandal, an unexpected loss, an unexpected slowing in its rate of growth, or business problems in one or more of these units. I doubt very much that either the management of this company or security analysts actually know what’s going on in so many companies. It is possible that some sharp analyst will publish an expose of Google that shows that its growth has been through accounting manipulation. Buying companies at what have to be competitive prices cannot achieve exceptional returns.

Will Google face diseconomies of scale?